Tuesday Chart Confirmation

Today we got what we were looking for, a break above resistance in the QQQ. I believe from this area we will see things turn negative and this will be a failed breakout or what we know as a purposeful head fake move.

I decided to take a couple of Long/Short ETF's for each of the averages and show you how consistent the signals are today-we are looking for market distribution overall in to this breakout so the longs should show distribution, the short or bear ETFs should should positive divergences/accumulation.

These are either 2x or 3x leveraged ETFs. Each average starts with the bear/short ETF which should see a positive divergence and followed by the bull/long version which for confirmation, should show a negative divergence.

Dow

 SDOW

UDOW

IWM

 SRTY

URTY

QQQ

 QID


 QLD

 SQQQ

TQQQ

SPY

 SPXU

UPRO

So above we have 4 different averages and 10 different ETFs, every one confirms the bearish distribution seen today above the QQQ breakout area. However we only see these signals out to about a 5 min chart, this bothered me earlier and is what kept me from entering new positions in any size today, we need solid confirmation signals and the highest probabilities to enter a trade, I'm glad we didn't and were patient as it was clear by the end of the day that they were going to close the QQQ's near their highs, draw in retail in the morning on a gap up and hopefully the real strong distribution will start in to that move which will give us a fantastic entry, edge and low risk.

The short term futures had to stay strong the last few days to make this move up in the QQQ, but once it was done, look at how they changed for the worse to negative divergences.

 ES (S&P Futures) 1 min

 ES futures 5 min clearly negative

 NASDAQ Futures 1 min, very negative as soon as the move in the QQQ was completed.

NQ 5 min is even worse with a leading negative divergence hitting a new low.

As for Leading Indications, High Yield Corp. Credit weakened during the afternoon as I hoped to see. FCT continued its negative divergence with its 3rd day lower vs the SPX move up. The $AUD is in a leading negative divergence, and the Euro is in line with the SPX, BUT DID NOT FOLLOW that last little ramp in to the close higher, which as I stated earlier, I believe is there for a very specific reason-look for a gap up in the a.m. Also there's lots of good signals suggesting distribution in the EUR/USD, which would send all risk assets lower, I took a small position in Energy Short today based on that.

Most notably was the intense High Yield Credit sell-off from 2:40 through the close as the SPX and market made that closing ramp, this is a great signal, in fact, here it is...

Look at that divergence between HY credit and the SPX (green), you really couldn't ask for better validation of the closing move in the market being total manipulation for a specific purpose, risk assets like HY credit wanted NOTHING to do with it.

Even commodities underperformed and had a bit of a sell-off vs the market, I suspect this has to do with distribution in the EUR/USD which will pressure commodities.


Basically things are going exactly as planned, we'll enter some positions as we get a little stronger signals, the stronger the better.

I'm going to take a look at breadth tonight, if I see anything that stands out, I'll let you know, I expect it will confirm market weakness in the underlying tone which is what gives us our edge.